Question

Could you please help me with 1a-c. Pictures below. It would be greatly appreciated. Thankyou so much.

1.a)

Use the information below for a four sector economy, answer the following questions: - 300 +0.75 Yd = = DELUXE 150 400 = Disposable Income GDP Consumption Taxes Investment Exports Imports Full Employment GDP Equilibrium Income 150 2,691 = YT Part 1: What is the value of autonomous expenditures Number Part 2: What is the slope of the aggregate expenditure function Number Part 3: What is the value of equilibrium real GDP Number Part 4: What is the value of the spending multiplier Number Part 5: What is the value of the government surplus(*)/deficit(-) Number Part 6: What is the value of Consumption (C) at equilibrium real GDP? Number Part 7: What is the Value of Saving at equilibrium real GDP? Number

b)

c)

Answer 1

1 a....... i. The value of autonomous expenditures =300+100+150+150=700

(autonomous spending doesn't depend upon level of GDP)

part 2. The slope of the aggregate expenditure function =0.75 (MPC)

part 3. At equilibrium ,AS =AD

Or Y=C+I+G+T , Y=C—+c(Y—T)+I++G+(X—M) Yd(disposable income)=Y—T

Y=300+0.75((Y—70)+100+150+(400—150) Y—0.75Y =300+0.75×70+100+150+250 Y(1—0.75)=800+0.75×70 0.25 Y=852.5 or Y =852.5/0.25 =3410

Thus equilibrium real GDP (Y)=3410

Part 4.The value of spending multiplier =1/(1—MPC) 1/(1—0.75) =1/0.25 =4

part5. The value of government surplus =government expenditures —taxes =150—70=80 part 6... value of consumption at equilibrium, C= 300+0.75(Y—T)    C= 300+0.75(3410—70) C= 2805

part 7.. Savings at equilibrium =Y—C S =3410—2805=505

1a and 1b are same only values differ.

In 1c trade surplus =import —export expensionary/recessionary gap =the difference between the real GDP and potential GDP.